Applications for mortgages decline for 2nd week in 3

Refinancings are down, home purchases ease

July 18, 2004|By BLOOMBERG NEWS

U.S. mortgage applications fell for the second time in three weeks as refinancing declined and home purchases dropped from the second-highest on record, according to an industry report.

The Mortgage Bankers Association said Wednesday that its general index of loan demand dropped 6.3 percent to 643.9. The purchase index declined 6.4 percent to 468.8, according to the association.

Home sales will be hard-pressed to accelerate as Federal Reserve policy-makers raise interest rates to keep inflation from accelerating, economists said. Job growth and borrowing costs close to historic lows will still help underpin housing in the second half of the year.

"Home sales are likely to stay at pretty lofty levels, but as the Fed raises rates you'd have to think sales are probably start to trickle lower," Steven Wood, principal economist at Insight Economics in Danville, Calif., said before the report. "We've probably seen the peak in housing, and we should see weaker numbers the rest of the year."

The mortgage group's index of mortgage refinancing fell 6.1 percent to 1662.4 last week.

The Federal Open Market Committee on June 30 increased the benchmark overnight lending rate by a quarter point to 1.25 percent.

Freddie Mac, the second-largest U.S. mortgage financier, raised its forecast for home sales this year, saying mortgage rates will be lower than it had previously expected.

The average rate for a 30-year fixed mortgage is likely to be 6.1 percent this year, down from a forecast of 6.3 percent a month ago, Freddie Mac Chief Economist Frank Nothaft said.

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